HealthEquity, Inc.

Good day and welcome to the Health Equity First Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Richard Putnam. Please go ahead.

Thanks, Ashia. This is Richard Putnam. Hello, everyone. Welcome to our First Quarter Fiscal Year 2026 Earnings Call. With me today, I have Scott Cutler, President, CEO, Dr. Steve Neelaman, Vice Chair and Founder of the company, James Lucania, Executive Vice President and CFO. Before I turn the call over to Scott, we note that a press release announcing the financial results of our first quarter of fiscal 2026 was issued after the market closed this afternoon. These financial results include contributions from our wholly owned subsidiaries and accounts they administer, as well as certain non-GAAP financial measures that we will reference here today. You can find a copy of today's press release on our investor relations website, which is ir.healthequity.com, and it will include reconciliations of these non-GAAP measures with comparable GAAP measures. We also note that our comments and responses to your questions today reflect management's view as of today, June 3, 2025, and will contain forward-looking statements as defined by the SEC including predictions, expectations, estimates, or other information that might be considered forward looking. There are many important factors relating to our business which could affect the forward looking statements made today. These forward looking statements are subject to risk and uncertainties that may cause our actual results to differ materially from statements made here today. We caution against placing undue reliance on these forward looking statements and we also encourage you to review the discussion of these factors and other risks that may affect our future results or the market price of our stock, as detailed in our latest annual report on Form 10-K and subsequent periodic reports filed with the SEC. We assume no obligation to revise or update these forward-looking statements in light of new information or future events. Now, over to Scott.

Thanks, Richard. Welcome, everyone. We're off to a great start for fiscal 2026. key metrics reflecting that great start. Steve will then give a brief update on HHSA expanding provisions included in the proposed budget bill passed by the House a couple of weeks ago. And Jim and I will detail Q1 financial results and our raised outlook for fiscal year 26. The team again delivered strong year-over-year growth across our key metrics in Q1, including revenue up 15%, adjusted EBITDA up 19%, HSAs grew 9%, CDB accounts grew 4%, driving total accounts up 7%, and HSA assets up 15%. Health equity ended Q1 with over 17 million total accounts, including net CDB account growth of 260,000 year-over-year, 9.9 million HSAs, holding over $31 billion in HSA assets. HSA assets increased $4 billion year over year. The number of our HSA members who invest grew by 16% year over year, helping to drive invested assets up 24% to $14.2 billion. HSA cash reached $17.1 billion. The average balances of our HSA members grew by 6% this year. Team Purple opened 150,000 new HSAs from sales in the quarter, down from Q1 of our record setting last year, reflecting softer macroeconomic conditions. While we are still early in this year's selling season, we continue to see a strong enterprise pipeline build and more SMB companies adopting HSA-qualified health plans. We are driving an enrollment and contribution strategy to grow from our existing client base, especially during uncertain times, which have historically brought stronger selling seasons. We are helping employers reduce health care costs while empowering employees to build real health security. As employers are seeking solutions to manage health care costs that are growing faster than wages, we believe our message to optimize plan design and employee engagement can drive growth from our existing and new client base. The 2024 year-end debonair report continues to reflect this market growth and HSA expansion, with health equity again taking market share as we now serve nearly a quarter of all HSAs in the USA. Deep Purple also made great progress expanding our member-first secure mobile experience during the first quarter. We are leveraging investments in mobility and AI by expanding our award-winning expedited claims, which uses AI technology to automate claims adjudication. With this AI technology, we now serve more than 7,000 clients, and we are processing millions of dollars in reimbursements, while also driving member satisfaction scores up and reducing processing costs. Our AI chat and AI agent support are accelerating service delivery to our members and accurately addressing their needs and questions while reducing call wait time and volume. We are building on the recently updated stacked chip card, which we rolled out last year to deliver on our promise of expanding into a digital wallet in the future. Custom brokerage investing in your HSA was also launched on the mobile app this quarter. These technologies are transforming the way Team Purple improves our members' experiences while reducing our costs to serve them. We are very pleased with our team's efforts to drive down successful fraud attacks on our HSA members. The launch of a number of added security measures and greater adoption of our member-first secure mobile experience has reduced direct fraud service costs from about $11 million in Q4 to about $3 million in Q1. This is still too high. However, under the direction of Sunil, our CSO, and his dedicated security and fraud team, we have reprioritized our investments in advanced security and fraud detection and prevention technologies to drive the fraud run rate exiting this quarter towards our goal of one basis point of total HSA asset per year. We have seen each month this year lower sequential fraud as our controls take hold and more of our members move to a secure mobile experience. We also are driving more of our HSA members to our newly relaunched app. We are modernizing our multi-factor authentication across our member logins, through their mobile experience, and are committed to continually updating our defenses as threats evolve. We are optimistic of the actions taken thus far and the continued strengthening and implementation of controls. A number of our PeerPro teammates joined Steve and me in Washington, D.C. last month to speak with national leaders as they consider measures that will expand access to and provide greater flexibility of HSAs for millions of American families. It was serendipitous the House released their draft of the budget bill while we were there. We are excited to see these HSA market expanding provisions move forward. Steve, can you briefly walk us through what we've seen so far and what to expect as they work through the budget bill process?